As per the latest World Investment Report, India got USD 64 billion in Foreign Direct Investment (FDI) in 2020, the fifth-largest in the world.
The report further indicated that with the second wave of Covid-19 affecting the country’s overall economic activities, its strong fundamentals offer ‘optimism’ in the medium term.
Released on Monday by the United Nations Conference on Trade and Development (UNCTAD) it also said FDI flows have been severely hit by the global pandemic and they plunged by 35% in 2020 to $1 trillion from $1.5 trillion last year.
As Covid-19 lockdowns around the world slowing down existing investment projects and the possibilities of a recession looming large multinational enterprises (MNEs) have had to reassess new projects.
The report also revealed that in India FDI went up 27% to $64 billion in 2020 from USD 51 billion in 2019, expediting acquisitions in the information communication technology (ICT) sector and thereby making the country the fifth-largest FDI recipient across the globe.
A fall of 12% in FDI outflows in South Asia driven by a drop in investment from India, which ranked 18 out of the world’s top 20 economies for FDI outflows, with $12 billion outflows coming from the country in 2020 in contrast to $13 billion in 2019.
The report stated, “Investments from India are expected to stabilize in 2021, backed by the country’s resumption of free trade agreement (FTA) talks with the European Union (EU) and its robust investment in Africa.”
Although the Asian countries have managed the health crisis comparatively well, the recent deadly second wave of Covid-19 in India depicts the existence of significant uncertainties, the report cautioned.
The pandemic escalated demand for digital infrastructure and services worldwide, leading to higher values of greenfield FDI project announcements, putting the onus on the ICT sector to rise by over 22% to $81 billion.
Major project announcements in the ICT industry are expected to add a $2.8 billion investment by online retail giant Amazon in ICT infrastructure in India.
Announced greenfield projects in India aiming 19% to $USD 24 billion, “and in April 2021, the second wave is impacting economic activities that could lead to a massive contraction in 2021, added the report and also mentioned that the outbreak in India severely shook major investment destinations like Maharashtra, home of one of the biggest automotive manufacturing clusters ie Mumbai, Pune, Nasik and Aurangabad, and Karnataka (Bengaluru – the Indian Silicon Valley) and exposed the country to production disruption and investment delays.
“Yet India’s robust fundamentals provide optimism for the mid-term,” the report said. “FDI to India has been on a long-term growth trajectory and its market size will continue to gain the attention of market-seeking investments. Additionally, investment into the ICT sector is expected to keep growing,” the report added.